The actuarial profession has become more prominent within the local economies in the MENA region and will play a significant role in the future with evolving insurance regulations. We spoke to Nitaq’s Mr Samih Geha about the opportunities and future for actuaries in the region.
Despite significant changes over the past decade, the actuarial profession in MENA remains largely focused on the insurance sector and is driven by regulators and regulatory work. Consequently, the profession is expanding particularly in jurisdictions where insurance regulators have a stronger presence and are given greater autonomy in driving the sector.
Independent actuarial consulting firm Nitaq chief actuarial officer Samih Geha said that auditors and audit requirements are also exerting a positive influence for actuaries in the insurance and other sectors.
“IFRS17 reporting will need to be implemented regardless of regulatory impetus and the same applies to the assessment of post-retirement employee benefits based on IAS19,” Mr Geha said.
Moreover, awareness of advanced actuarial applications and projects such as reinsurance optimisation and capital modelling has begun among the larger and best-governed insurance companies. Previously, strong reliance was placed on reinsurance brokers to provide such support but, of late, executive management is expressing the need to have a more independent perspective.
Some actuarial players have shown eagerness both to benefit from and apply technology innovation and digital transformations to their operations. “The insurance industry is behind on such considerations, as the prevailing solutions sought and utilised by insurers are still among the legacy names and architectures,” said Mr Geha, addressing some of the challenges facing actuaries in the region.
Hard beginnings
For Nitaq, its beginnings were painful and its teams struggled with data-quality issues. It took them a few years to streamline data-processing protocols to be in a position to provide support and recommendations to its clients in terms of enhancing their own data.
“We work with people - and from the onset - we had to find the right approach to select the executives we would like to work with, as we needed to trust them as much as we needed them to trust us,” said Mr Geha.
The actuarial work involves significant elements of judgement and remains uncertain considering that Nitaq is a contractor to the insurance company. “In many aspects, we need to rely on the insights and soft information provided by management and help them monitor their statements and objectives in time,” he said.
During the initial period of its work in the region, analytics were rudimentary and dealing with profitability indicators was another major challenge as companies used to rely on misleading data provided by intermediaries or other service providers. Moreover, there was a price war prevailing in all lines with little consideration for profit optimisation.
“Nowadays, we can be proud to see the progress that most of our clients made; competitive strategies can still be adopted from time to time, but they are decided upon with a clear purpose in mind and with an understanding of the implications on profitability and on the financial condition,” he said. It was the evolving insurance regulations and focus on governance that were an important driver that helped with the work.
Opportunities galore
Mr Geha feels that insurers today have an excellent opportunity to take advantage of the new technologies and enhance their pricing and analytics. For this, he believes the early birds have an opportunity to mark a huge competitive advantage over their peers.
“However, most of our clients are dragged down by their core IT systems which, for the most part, are primarily billing systems built on traditional technologies with little ability to follow fast developments,” he said.
Unfortunately, insurers made significant investments in such systems and find it difficult to put them to retirement too soon. “Data issues are also present in other industries and we see it clearly when we need, for example, to gather data on staff in order to derive proper projections for growth of wages or turnover by category of employees,” he said.
He indicated that HR often does not invest in proper systems to capture and maintain relevant data on staff and the scarcity of technical expertise across the Middle East is a challenge. As appointed actuaries, it has to build proper relationships with its insurance clients which include different specialists within the organisation like underwriters, claims managers, reinsurance experts, product management and distribution experts, as well as financial specialists.
“The industry has yet to reach an adequate level of staffing in order to benefit most from the actuarial reporting that is being provided,” he said.
Positive environment for actuarial studies
Mr Geha highlighted how regulators and universities are
playing a positive role in promoting the actuarial profession and encouraging young talent to pursue courses with universities that also provide their students with the possibility to finish exams before starting work.
“On the other hand, the way in which regulations are getting strengthened means that more and more actuarial talent will be needed in the coming decades and this is a golden opportunity for the young students of today, who will be in a good position to take the reins of the insurance sector if they prepare themselves adequately,” he said.
Technology as a value add
Mr Geha believes that actuarial firms that invested in modern technologies will prevail. Markets are seeing major disruptions despite the resistance due to legacy core systems and the existing traditional offering.
“The coming years will see more disruption with the introduction of fast-computing cloud-based solutions using big data, the introduction of AI algorithms and the enhanced need for integrated platforms capable of supporting multiple processes such as pricing, performance monitoring, financial reporting and capital modelling,” he said.
He also believes that financial reporting represents an immediate need that will open the door for technology disruption and that pricing will be the area where modern technologies will show their added value.
Demand for actuaries to stay
Mr Geha feels that because of the changes taking place, young actuaries must be thoroughly involved in data-science approaches and methodologies. He believes that the need for more actuaries in the region will remain for decades to come.
“The actuarial discipline has not yet gone beyond the traditional boundaries of insurance and related disciplines such as social insurance, pensions and similar activities,” he said.
He believes that this will change, particularly if the profession succeeds in adopting and applying modern technologies and techniques. “The role of the actuarial profession in the local economies will become significantly more prominent,” he said of the future of actuaries in the MENA region. M